Less than a month ago, Chinese media and electronics firm LeEco made its glitzy launch into the US market. However, its founder Jia Yueting has just told staff that the firm is in trouble.
Back then LeEco (pronounced Le Echo) promised a smartphone better in spec to Google's Pixel or Apple's iPhone but costing half as much; a $5,000 seven-foot Android-powered smart TV; an electric autonomous vehicle; an electric bike; and a VR headset. Now it is slashing its expectations and product lines.
"No company has had such an experience, a simultaneous time in ice and fire," Jia said in a letter to staff that was leaked to Bloomberg News. "We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited."
He wrote that the company had caught "big company disease" and has grown faster than its organization could cope with. As such, the company will be trimming the fat and tightening up its product line, and Jia said he would cut his annual salary to a single Yuan ($0.15) as an economy measure.
As the news spread, LeEco came under fire in online media, with Xiaomi cofounder Lei Jun taking to social media to question the financial situation of his rival. Jia hit back, saying the firm shouldn't be spreading rumors, to which a Xiaomi social media account responded that LeEco should focus more on its debt.
LeEco sprang from Chinese streaming media provider Leshi, which has more subscribers than Netflix, and was the first such firm to launch on the Chinese stock exchange. Since then it has mushroomed into a consumer electronics firm offering a vast range of products.
The Register was at the launch and noted that the product lines seem somewhat ambitious. The electric bike, powered by Android, looked needlessly complicated and oddly specced (rearward-facing twin lasers to spot traffic), but the firm did seem to be offering a lot at very low prices.
We're currently reviewing the LeEco Pro 3 smartphone and it's doing very well. In pure hardware terms, the phone is more advanced than Google's Pixel XL but was selling (with early order discounts) for less than half the price. The TV was also much cheaper than the competition.
So far, it seems LeEco is still looking to carry on its US expansion. But the company might have to hold back its ambitions for fear of trying to bite off more than it can chew. ®